Some things I read this week: 1/7/18

Morgan Stanley Research on Quantum Computing

  • Quantum computing use the laws of physics for computation, whereas classical computers use mathematics
    • Example: take the image of a coin. In classical computing, you have binary states of information (heads/tails, 0 or 1). Quantum computing stores information in any state between 0 and 1, thus retaining much richer information than that of classical computing
  • The kicker: quantum computing will enable exponentially faster computation speed than our standards today. Early applications are expected to be in the chemistry/pharmaceutical industries to discover new materials and drugs, oil & gas for well data analysis, utilities for nuclear fusion, and industrials for design, manufacturing and predictive maintenance.
  • Hurdles to success: (among others) quantum computers must operate at extremely low temperatures and in large sizes

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J.P. Morgan ETF Handbook

  • Exchange Traded Fund: a fractional ownership interest in a portfolio of securities, commodities or other instruments. Like stocks, they are listed on at least one stock exchange; like mutual funds, they are available on both broad and narrow indices and also may be actively managed.
  • Advantages of ETFs
    • Offers investors exposure to a desired market or benchmark through single-security trading, which usually means intraday liquidity, continuous, real-time pricing (close to the Net Asset Value of the underlying instruments in the ETF), and available to be sold short and purchased on margin
    • Tax advantages: whereas mutual funds often have higher asset turnover than ETFs (mutual funds may be more actively managed, need to rebalance their portfolios due to structural requirements, or need to meet shareholder redemptions). Higher asset turnover means higher capital gains taxes, so the ETF is preferable. In addition, mutual funds need to sell securities to raise cash to meet shareholder redemptions in the case of an investor withdrawal; however, ETFs trade like stocks and the ETF managers do not need to manage the process or suffer from additional capital gains taxes.
    • The combination of tax advantages and management structure often result in much lower expense ratios for ETFs when compared to many mutual funds.


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